The president of the Maldives swept into power a year ago on a campaign to push India out of the island nation’s affairs and draw closer to China. Now, as a debt crisis looms and earlier Chinese loans come due, he is in New Delhi looking to mend some fences.
Mohamed Muizzu arrived in New Delhi on Sunday on his first state visit, with the country’s financial crisis likely to be a key feature of discussions with Prime Minister Narendra Modi’s government. Prior to his visit, Muizzu has softened his rhetoric notably, saying he’s never opposed India and New Delhi knows the financial strain his nation is under and was willing to help.
Read more: 'Will never hurt India's security interests', says MuizzuThat’s a contrast to a year ago when he took office, pushing for the withdrawal of Indian troops from the Maldives and promising new big-ticket projects backed by China. His campaign thrust the Maldives to the center of the rivalry between the two powers, which have been vying for influence over the Indian Ocean nation known for pristine beaches and its strategic location straddling global shipping routes.Both countries — and others — have poured hundreds of millions of dollars worth of loans into the Maldives in recent years, saddling the tourism-dependent nation amid a protracted economic slowdown, a drought of foreign reserves and a slow return of visitors.
The country’s debt is estimated at 110% of gross domestic product, and risks are growing it may fail to make payments on its sukuk. If that were to happen, it would be the world’s first default of an Islamic bond.
Read more: Maldives president Muizzu arrives in India for first bilateral meet. What's at stakeIndia gave the Maldives a $50 million lifeline last month to help it avoid that outcome, but that was likely only a short-term fix given additional looming payments, according to investors and analysts.
Fitch Ratings estimates the country’s total external debt obligations will grow to $557 million in 2025, and exceed $1 billion by 2026. The island nation’s foreign reserves stood at just $437 million as of the end of August, sufficient to cover only around one-and-a-half months of imports.